For fund managers, impact reports serve as a powerful tool for communicating the impact results of their portfolios. These reports not only provide transparency, but also can play a crucial role in engaging stakeholders and demonstrating appropriate accountability.
BlueMark has led the advancement of best practices for impact reporting through original research and the development of a proprietary verification methodology. Our research, published in the “Raising the Bar” series, identified key elements that GPs and LPs agreed would enhance the usability of impact reports, which later informed additional research and stakeholder consultations by Impact Frontiers, ultimately leading to the establishment of the Impact Performance Reporting Norms.
As you prepare your next impact report—or begin planning for a future publication—it is essential to consider how to maximize its effectiveness. Too often, these reports share common pitfalls that dampen their impact, making them less compelling, harder to digest, and ultimately less useful to readers.
Having verified numerous impact reports published by a diverse range of fund managers, we have collected our key observations on these common pitfalls in impact reporting across the four key pillars of BlueMark’s reporting assessment framework—Impact Strategy, Impact Results, Data Clarity, and Data Reliability—as well as the concrete steps fund managers can take to improve their reporting processes.
Impact Strategy
Most impact investors do a good job of articulating their impact strategy or thesis in their reports. For example, in our most recent research report, we found that 94% of funds have impact objectives that are clearly defined. However, only 56% of investors support these objectives with well-documented theories of change, weakening the connection between their stated goals and the measurable outcomes presented in their impact reports.
A strong impact report should describe the connection between investment strategies and expected outcomes. This includes outlining how specific investments contribute to addressing sustainability challenges and demonstrating the anticipated scope and scale of change. Using visual tools such as charts and diagrams can help clarify key aspects of the strategy, including the theory of change and the pathway from investment to impact.
Fund managers should also clearly communicate their intended impact using measurable indicators. Rather than simply stating a broad goal, such as increasing affordable housing, it is essential to quantify the expected results and, further, to articulate how they will benefit the intended stakeholders.
Recommendation: Include a visual depiction of your impact thesis
A common challenge identified in our evaluations of impact reports is the lack of clarity regarding which stakeholders are affected, both positively and negatively, by an investor’s actions.
While impact investors often aim to generate broadly beneficial outcomes—such as job creation, reduced pollution, or cleaner water—the effects are rarely uniform across all groups. In complex social and economic systems, benefits for one set of stakeholders may come with unintended consequences for others, particularly in cases where new technologies or innovations disrupt established industries or local communities. Clearly identifying affected stakeholders is an important part of a comprehensive and transparent impact report.
Further, it’s important to map out the positive and negative impacts for each major stakeholder group, and to include commentary on how each group has been or might be affected. A fund manager may not have direct control or influence over each of these impacts, but understanding them is still a critical part of evaluating overall impact performance.
Recommendation: Specify which stakeholders are being affected by each theme or investment, and how
Impact results
The results section is often the most scrutinized part of any impact report. Unlike financial performance, which follows standardized reporting conventions, there is no universally accepted framework for disclosing impact performance data.
The Norms recommend, and many LPs prefer, impact performance to be reported at the individual investment level. While portfolio-level metrics provide a broad view of impact scale, they often lack the context needed to assess the performance of specific investments or their relative contributions to overall impact outcomes. Reporting at the investment level offers greater transparency and a clearer understanding of how each investment drives change.
Although some fund managers may struggle to obtain reliable metrics for certain portfolio companies, particularly early-stage ones, providing a more detailed breakdown is almost always more valuable for assessing performance than a more limited dataset. Including these more granular data points offer greater insight into individual investments and help stakeholders better understand the impact generated across the portfolio, making the report more useful and actionable for readers.
Recommendation: Include KPIs at the investment-level, not just the portfolio-level
A common concern raised by LPs is that impact reports often fail to adequately contextualize performance. In the broader investment management industry, reporting on financial performance typically includes references to benchmarks, such as the S&P 500, thereby providing a clear frame of reference for assessing performance.
Although the impact investing industry has yet to establish such standardized benchmarks, fund managers can support LPs in distinguishing between strong and weak impact performance by setting clear targets and providing qualitative context, including external thresholds (e.g., science-based targets, net zero goals, living wage index, etc.) where available.
For example, a manager focused on advancing financial inclusion might set a target for the number of people it aims to impact by a specific year, and provide annual updates on its progress toward that goal. When setting targets is not feasible, comparing data to baseline KPI values or previous performance can help illustrate progress over time and offer meaningful context for evaluating performance. In either case, any performance data should be accompanied by commentary on the results to help readers understand what success looks like for the manager.
Recommendation: Present performance relative to targets or baselines
Data clarity
The reliability of reported performance data is primarily determined by the robustness of a fund manager’s measurement methods and the integrity of its impact management processes. However, many investors present impact data without sufficient supporting evidence, expecting readers to accept it at face value. Applying this “trust us” approach to reporting increases the risk of misinterpretation and limits stakeholders’ ability to critically assess the accuracy and credibility of the reported results.
Fund managers should clearly cite data sources, indicator definitions, and calculation methodologies in their impact reports. This ensures that LPs understand where each data point originates and what it represents.
For example, fund managers can specify whether data is self-reported or derived through calculations, as well as define the time period over which it was collected. Additionally, when reliable data is unavailable for certain parts of the portfolio, offering a clear explanation can help maintain transparency and credibility in reporting.
Recommendation: Show your work, including data sources and definitions
Data quality
Many impact reports offer a high-level overview of a fund manager’s approach to impact management. However, providing additional insights into internal quality control protocols for impact data collection can further strengthen LP confidence. While it may not be necessary to include these policies in the report itself, fund managers should reference their existence and be prepared to share them with LPs upon request.
Recommendation: Codify policies in internal documentation
Much of the performance data included in a typical impact report is directly sourced from portfolio companies, typically via a questionnaire or another data collection instrument.
However, LPs often report skepticism as to the accuracy and reliability of the portfolio company data included in impact reports. This is not surprising given that just 3% of recently surveyed funds regularly assured their data through internal quality control processes or third-party providers.
To address this concern, fund managers should be transparent about their processes for collecting, reviewing, and validating the data they receive from portfolio companies. Some managers may even want to explore obtaining third-party assurance of investee data to provide an extra check of credibility, even if the assessment is just focused on a handful of KPIs rather than every available data point.
Recommendation: Consider third-party assurance of data collected by investees
High-quality impact reports are more than marketing tools—they are a critical means for fund managers to communicate their progress, set expectations, and build trust with their investors. By addressing these common pitfalls, fund managers can enhance the decision-usefulness of their reports and bolster their credibility.